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The mortgage payment holiday scheme was introduced in March 2020. The pause on monthly repayments was announced as part of an unparalleled package to support individuals, businesses, and the wider economy. The scheme is open to homeowners, landlords and investors with property loans.
An Extension of Support for Struggling Homeowners
The mortgage payment holiday scheme would have ended on Saturday 31 October. Fortunately, the UK Government announced a 9-month extension to continue to support those struggling due to the economic impact caused by COVID19. Borrowers have until 31 March to apply for the scheme which now ends 31 July 2021.
A study by the Joseph Rowntree Foundation found that 1.6 million households (a fifth of British mortgage-holders), were worrying about mortgages. In the first phase, over 1.8 million individuals took advantage of this scheme. As of November 2020, banks have granted 2.6 million mortgage payment deferrals, with over 140,000 still in place.
The Economic Secretary to the Treasury, John Glen said:
We’re doing everything we can to help people with their finances at this difficult time, and that includes making sure people get the support they need with their mortgages. That’s why we’re working with the banks and lenders to extend payment holidays if people need them.
You now have until 31 March 2021 to request a payment holiday. After this date, you’ll be able to extend deferrals up to 31 July, subject to not exceeding the six-month limit. It is worth noting, deferrals will not be reported as missed payments on credit files. According to the new guidance published by FCA, homeowners are entitled to payment holidays of up to 6 months in total!
Review Your Options
Lenders will be expected to contact clients whose mortgage holiday is coming to an end. Lenders may offer options including reassessing your mortgage.
Resume to full monthly repayments.
Pay a portion of the monthly payment.
Switch to an interest-only mortgage, on a temporary basis.
Extending the mortgage payment holiday.
The market continues to move forward as competitive mortgage deals are on the rise. Providing more choice to homebuyers and investors seeking mortgages. To support mortgagers, lenders will be providing options to those resuming payments. Borrowers will be given the opportunity to lengthen the term of their mortgage to leave their monthly payments at the same level as they were prior to their mortgage holiday. Following advice from the FCA;
Customers who can afford to return the full repayment should do so. Lenders should contact customers to assess if payments can resume. Agree on a repayment plan if possible.
Support is available to those that need help. Lenders should continue to provide support including a further three-month deferral if needed.
If a customer has not yet taken advantage of the mortgage holiday but is facing financial difficulty. They should be able to request a payment holiday.
Payment holidays will not be affecting credit files
Christopher Woolard, Interim Chief Executive at the FCA, said:
Our expectations are clear – anyone who continues to need help should get help from their lender. We expect firms to work with customers on the best options available for them, paying particular attention to the needs of their vulnerable customers, and providing information on where to access help and advice.
The Ban on Home Repossessions Continues
The Financial Conduct Authority (FCA) announces the ban on home repossessions is extending to 31 January 2021.
This is following an extension from the previous date of 31 October 2020. As a result, home repossessions plunged by 93% in the first half of 2020 in comparison to 2019.
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